Did the SEC whiff on R. Allen Stanford?

(MoneyWatch) COMMENTARYR. Allen Stanford faces life in prison after a Texas court on Tuesday convicted the financier of defrauding investors in one of the biggest Ponzi schemes in U.S. history.

Jurors found the former banker, founder of Stanford Financial Group, guilty on all but one of 14 counts that federal prosecutors had filed against Stanford in 2009. A judge could sentence him to as many as 20 years behind bars for each fraud count, although the term could be far longer if he is ordered to serve the sentences consecutively.

"We are disappointed in the outcome. We expect to appeal," said one of Stanford's attorneys after the hearing, according to The Associated Press.

Stanford, whose personal wealth was once estimated at more than $2 billion, rose to fortune buying and selling real estate during the Texas land boom in the 1980s. In later years, he became as known for his lavish lifestyle, buying a Florida castle for one of his girlfriends and putting up millions of dollars in prize money for international cricket tournaments.

Like many other moguls looking after their business interests, Stanford also spread his wealth around Washington. Beginning in 2001, he gave $40,000 to the Senate Republican Campaign Committee and $100,000 to then-President George W. Bush. When the Democrats took control of Congress in 2002, he promptly gave $500,000 to the Democratic Senatorial Campaign Committee.

The contributions appear to have won Stanford some powerful friends in Congress. Only hours after federal agents in February 2009 charged Stanford and other company executives of carrying out a $7 billion scheme to sell bogus certificates of deposit from his Antigua bank, Rep. Pete Sessions, R.-Texas, reportedly sent him an email saying, "I love you and believe in you."

Stanford's connections also may have played a role in discouraging more aggressive action by securities regulators to uncover his fraud. The SEC investigated him for more than a decade, with staff in the agency's Fort Worth, Texas, bureau repeatedly expressing concern about Stanford's financial activities. But the probe was put on the back-burner, a decision SEC Inspector General David Kotz attributed to the agency choosing to focus on easier cases. As he told Senate lawmakers in a 2010 hearing on how Stanford escaped regulators' attention:

We found that senior Fort Worth officials perceived that they were being judged on the numbers of cases they brought -- so-called "stats" -- and communicated to the Enforcement staff that novel or complex cases were disfavored. As a result, cases like Stanford, which were not considered "quick-hit" or "slam-dunk" cases, were not encouraged.

The much larger Ponzi scheme that surfaced in 2008 perpetrated by convicted fraudster Bernard Madoff brought renewed regulatory scrutiny to such chicanery. Yet while the SEC has been more aggressive of late in pursuing financial fraud, the agency continues to draw fire for lax enforcement. By its own account, the SEC had a chance to stop Stanford long before his scam finally came to light. If justice is now being served, the case continues to raise troubling questions about the agency's efficacy in its core mission of protecting investors.

Correction: An earlier version of this story incorrectly stated that Sen. Jeff Sessions had reportedly sent an email of support to Stanford. Authorship of the email we cited should have been attributed to Rep. Pete Sessions. We regret the error.